Indebted to trouble

It was recently reported that in Singapore the household debt rose to 174 per cent of personal disposable income in 2001. The figure looks set to rise even further this year.

According to the Government the household debt was just 118 per cent in 1995.

Bad credit card debt is also rising at alarming levels. Banks were forced to write off $122 million in bad credit card debt in the 12 months to October this year, a jump of 65.3 per cent from the same period last year.

This has led to a record number of bankruptcies, exceeding last year’s figure of almost 4,000. All this begs a very big question: What caused such an abysmal state of things?

Much of this can be traced to our housing policy ~V specifically the price of property. Over the years, HDB flat prices have skyrocketed. From HDB Annual Reports, prices of flats increased by as much as 200 percent between 1990 and 1995 in certain areas! For example, a 5-room flat in the West Zone in 1990 cost about $78,000 in 1990. The same type of flat cost $225,400 just five years later ~V a jump of 197 percent.

Contrast the increase in wages over the same period and you get an idea of how much increase in housing prices have out-stripped wage increments. Put another way: Has anybody, save for the ministers perhaps, seen their salaries increase by 200 percent ~V or even anywhere remotely close to that amount?

Coupled with the fact that Singaporeans have no choice but to stay in HDB flats, it is no wonder that most people are mortgaged up to their eyeballs. With little or no room for maneuver, bankruptcy and financial disaster strikes with a vengeance when the economy goes south.

The property price bubble occurred when the PAP decided to implement its policy of “Sasset enhancement”. This was a political decision more than one based on sound economic reasoning. The PAP wanted to keep Singaporeans indebted to the Government so that come elections the PAP can use threats to ensure that the electorate remains obedient to it.

One internet user commented that, “If you care to notice, almost every negative aspect that can be attributed today to the Singapore economy can be traced to government policy of asset enhancement scheme. We are all still paying the price for this madness”.

The problem is that having put all their money into housing through the CPF, Singaporeans are left with almost nothing for their retirement years. It is no exaggeration to say that the situation is in a crisis. The SDP has repeatedly highlighted this issue throughout the 1990s before the PAP admitted the problem in 1999.

The internet user continued: “Apparently Singaporeans are all blinded by their greed and overwhelming blind trust on the PAP Government’s slogan of “asset enhancement” in the past. This is a direct result of the lack of credible balancing power on the other end. It results in a nation-wide ‘financial epidemic’ which will eventually bring all of us down the drain.

Even the little money that Singaporeans have left in their CPF is not available to them during times of financial hardship. Instead, the money is taken out of the country in the form of reserves and invested by the Government in questionable portfolios with even more questionable returns. Incredibly, the Government will not reveal the accounts.

The reserves are also used to fund government businesses in the form of GLCs. Of late, alarm bells have been ringing about the health and viability of these companies many of which have incurred billions of dollars in losses. Again, the SDP had warned of this as early as 1993 when the matter had not yet become a talking point.

Something must be done and done quickly to stem the rot. Unfortunately, without democracy and a free press, the PAP will continue to exercise power without any check. It seems that matters are set to get worse before the politico-economic arrangements in this country are forced to change.

Good luck to us all.

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